What insolvency procedures are available in the jurisdiction? Does management continue to operate the business and/or is the debtor subject to supervision? What roles do the court and other stakeholders play? How long does the process usually take to complete?

Restructuring & Insolvency (2nd Edition)

Denmark Small Flag Denmark

• What insolvency procedures are available in the jurisdiction?
There are two types of in-court insolvency procedures in Denmark; restructuring and insolvency.

The purpose of restructuring is to obtain an arrangement with the creditors, transfer a business or a combination or wind down operations in cooperation with the former management.

The purpose of an insolvency procedure is to sell the debtor’s assets with a view to distributing the seller’s assets between the creditors.

• Does management continue to operate the business and / or is the debtor subject to supervision?
In respect of restructuring proceedings, the management continues to operate the business together with a restructuring administrator appointed by the insolvency court. The management must not make important decisions without the consent of the restructuring administrator.

In certain circumstances, the restructuring administrator may take over the management.
When the insolvency order has been issued, the management is deregistered and subsequently the trustee takes over the management of the business.

• What roles do the court and other stakeholders play?
In restructuring proceedings, the proposed solution must be presented to the creditors for their approval. If the proposed solution is not accepted by the creditors, insolvency proceedings will be commenced against the debtor.

In insolvency proceedings, the trustee has the full decision-making power and may consequently deal with the assets of the estate without the consent of the creditors.

In respect of restructuring proceedings as well as insolvency proceedings, the insolvency court is the supreme authority and is not to approve transactions but is only to ensure that the administration is in accordance with the Danish Insolvency Act.

• How long does the process usually take to complete?
A restructuring process may take up to 12 months at which time a restructuring proposal is to be voted on. The restructuring administration usually takes 2-6 months.

There is no specific timeframe for the administration of an insolvent estate but it is typically 1-2 year. In case of particularly complicated estates or if legal proceedings are conducted, the administration may take considerably longer.

China Small Flag China

Bankruptcy procedures available in China include liquidation, restructuring and settlement. In a liquidation or settlement procedure, the administrator takes over the debtor; while in a restructuring procedure, upon the approval of the court, the debtor may manage its own assets and operate its business under supervision of the administrator, who is nevertheless still in charge of the debtor. Bankruptcy procedures are judicial proceedings subject to the direction and supervision of the court. The administrator is appointed by and report to the court and performs its duties in accordance with law under supervision of the creditors’ meeting and the creditor committee. Creditors exercise their rights via the creditors’ meeting or the creditor committee, but the establishment of the creditor committee is contingent on the decision made at the first meeting of creditors. Certain personnel of the debtor are obliged to provide cooperation in the procedures. In the case where the creditors file for liquidation of the debtor, the capital contributors of the debtor have the right to request for restructuring of the debtor, and if the proposed restructuring plan involves adjustment of the interests of the capital contributors, they are entitled to vote on such plan. Chinese law does not prescribe a specific time limit for hearing a bankruptcy case, but in practice, some courts have set their own one-, two- or three-year limit based on the complexity of bankruptcy cases. For simple bankruptcy cases involving a small amount, some courts have adopted a six-month summary procedure on a trial basis.

Australia Small Flag Australia

There are 3 formal insolvency procedures that operate in Australia:

(a) Voluntary administration;
(b) Liquidation; and
(c) Receivership.

Each of the formal processes, other than receivership, has a moratorium in place to prevent unsecured creditors (including shareholders) from enforcing their rights. Whilst no such moratorium exists in receivership, to the extent an unsecured creditor takes action to enforce its rights, it has no recourse to the assets which are secured and in the control of the receivers.

Voluntary administration

Voluntary administration is a creditor driven process, and whilst designed to be short and temporary, can last for months, if not years in complex situations.

Upon appointment, the administrator takes control of the company’s business, affairs and property. The administrator has extensive powers and is entitled to perform any function and exercise any power the company or its officers would otherwise perform. In performing this function, the administrator will be acting as the company’s agent. Administrators are granted a right of indemnity out of the company’s property (other than property the subject of retention of title arrangements that are subject to a perfected PPSA security interest).

The purpose of the voluntary administration process (outlined in Part 5.3A of the Corporations Act) is to either:

(a) maximise the chances of the company, or as much as possible of its business, continuing into existence; or

(b) result in a better return for the company’s creditors and members than would result from an immediate winding up, if it is not possible for the company or its business to continue to exist.

In practice, administrators tend to recommend or adopt one of three strategies; a simple sale of business and assets, a move to liquidation or a recapitalisation plan (effected through a deed of company arrangement). The latter two strategies require the approval of creditors (by 50% of those creditors voting in number and value).

Liquidation

In Australia, a company may be wound up:

  • if solvent, voluntarily by its members (members’ voluntary liquidation); or
  • if insolvent, by its creditors (creditors’ voluntary liquidation); or
  • compulsory order of the court.

Upon appointment, a liquidator will assume control of the company’s affairs and has the power to realise and distribute assets to the exclusion of the directors and shareholders. A provisional liquidator will also control the affairs of the company to the exclusion of the directors and shareholders.

Court involvement is required in a compulsory winding up, where it will appoint the liquidator. It will also consider applications by the liquidator, pursuant to section 480 of the Corporations Act, for an order that the liquidator be released and that the company be deregistered after the liquidator has realised all of the property of the company or so much of that property as can, in his or her opinion, be realised without needlessly protracting the winding up, has distributed a final dividend (if any) to the creditors, has adjusted the rights of the contributories among themselves and made a final return (if any) to the contributories. The court must be satisfied that no creditor will be adversely affected by the order.

The length of a liquidation process will vary depending on the company and how complex the business and affairs of the company are. Other factors that will affect the length of the liquidation include whether litigation is necessary to recover funds/assets belonging to the company. For a small company, with uncomplicated affairs, the winding up can be usually completed between 12 to 18 months. Where the company has more complicated affairs and is the subject of litigation, the winding up can take some time.

Belgium Small Flag Belgium

Bankruptcy

At 0:00 hours on the day of the court order opening the bankruptcy, the management and administration powers will be taken over by a bankruptcy trustee. The directors must comply with any request of the bankruptcy court and/or trustee.

The court appoints a judge-commissioner, who will supervise the trustee, approve certain transactions and report to the court. The court usually only intervenes upon request of the trustee (who has very broad powers, and must realize all assets and distribute the proceeds amongst the creditors), e.g. to approve a temporary continuation of the business or decide upon a contested creditor claim. Depending on the complexity, a bankruptcy procedure usually takes 1-3 years.

In-court reorganization procedure

If the court grants the debtor a stay, the debtor remains in possession. Provided certain conditions are met, the DIP or a third party may request the court to appoint a legal officer or ad hoc director. When granting this request, the court will describe the appointed officer or director’s assignment and duties.

A stay is usually granted for a period of 1-6 months, with an absolute maximum of 18 months (this requires exceptional circumstances).

The Netherlands Small Flag The Netherlands

There are two main types of insolvency proceedings under Dutch law: bankruptcy proceedings and suspension of payments proceedings. Generally, a bankruptcy is aimed at the liquidation of the assets of the debtor for the benefit of his creditors, whereas a suspension of payments primarily serves to provide the debtor temporary relief against pressing creditors with a view to continuity of his business.

The most important effect of the bankruptcy is that the debtor loses the power to dispose of its assets. Only the trustee can dispose of the assets from then on.

In a suspension of payments, the debtor may no longer administer or dispose of his assets without the cooperation, authorisation or assistance of the administrator.

The court opens the bankruptcy proceedings at the application of the debtor or a creditor. At the time the bankruptcy is declared, a trustee (curator) and a bankruptcy judge, whose main task is to supervise the actions of the trustee, are appointed by the court. Furthermore, the court opens the suspension of payments proceedings at the application of the debtor. When a suspension of payments is granted, the court will also appoint a member of the local bar as administrator, and usually also a bankruptcy judge. In principle, the debtor has no control over who the court appoints as administrator or trustee.

Employees and shareholders have a limited role to play in insolvency procedures. If the insolvent debtor is an employer, employment contracts can be terminated by both the trustee and the employee.

There is no set time frame within which bankruptcy proceedings should be concluded. In practice various factors (e.g. complexity of the bankruptcy, agenda of the trustee) are relevant. Bankruptcy proceedings may therefore in practice last between one and several years. Given that a suspension of payments serves to provide the debtor temporary relief against pressing creditors, a suspension may be granted for a maximum period of 18 months and may be extended without limit at the request of the debtor for successive 18 months periods.

United States Small Flag United States

The following proceedings govern insolvency proceedings in the United States:

  • Liquidation: Chapter 7 governs liquidations and applies to individuals and corporations. Once a chapter 7 petition is filed and the proceeding is commenced, the automatic stay is immediately triggered, preventing any creditors from taking enforcement actions against the debtor. Once the case is commenced, the management and board are displaced and a trustee is appointed. The trustee is charged with marshalling and liquidating the debtor’s assets, but he/she may also continue to operate the debtor’s business for a period of time if it is in the best interests of the estate and is consistent with an orderly liquidation. After providing notice to all creditors, the trustee will also convene a meeting of creditors, assess and liquidate assets and distribute them to creditors. The length of time it takes to complete a chapter 7 liquidation depends on the assets and liabilities of a given debtor and the complexity of the liquidation and distribution.
  • Municipal reorganization: Chapter 9 governs municipal bankruptcies (states and the federal government may not file under chapter 9). In order to file, the municipality must (i) be authorized under state law to file, (ii) be insolvent, (iii) desire to effect a plan to adjust its debt and either (a) have obtained an agreement with creditors holding at least a majority in amount of claims in each class that the entity intends to impair and have negotiated in good faith or demonstrated that negotiations are impractical or (b) believes that a creditor may attempt to obtain a transfer that is avoidable as a preferential transfer. The commencement of a chapter 9 proceeding also triggers the automatic stay but is much broader for a chapter 9 debtor and applies to actions or proceedings against officers or inhabitants of the municipality. Under chapter 9, a plan of arrangement is confirmed which is similar to a chapter 11 plan, but has some notable differences including that the absolute priority rule does not apply because a municipality does not have shareholders.
  • Reorganization of corporations and individuals: Chapter 11 governs voluntary reorganization, focusing on the continued operation rather than the liquidation of the entity. Generally, the entity continues to operate as a debtor-in-possession, with the goal of ultimately restructuring its pre-petition obligations in order to emerge from bankruptcy with a stronger balance sheet and more manageable obligations. The ultimate goal is the approval of a chapter 11 plan, which, during the first 120 days, the debtor has the exclusive right to propose (and may be extended for another 18 months). The length of time varies considerably depending on the complexity and size of the case.
  • Restructuring debt of farmers and fisherman: Chapter 12 governs “family farmers” or “family fishermen” with “regular annual income.” Chapter 12 is a more streamlined process than chapter 11 or chapter 13 in order to address the specific needs of family farmers or fishermen and to allow them to propose a plan and make installments to creditors over three to five years.
  • Restructuring debt of individuals: Chapter 13 governs individuals, allowing those with income to develop a plan to repay his or her debts, usually on a timeline of three to five years depending on the debtor’s median income, and in no event longer than five years. While undergoing the repayment process, the law prohibits creditors from pursuing collection efforts.
  • Cross-border insolvencies: Chapter 15 governs cross-border insolvencies and largely implemented the United Nations Commission on International Trade Law (“UNCITRAL”) Model Law on Cross-Border Insolvencies (the “Model Law”) into domestic law, with the aim of providing a simplified process for the recognition of insolvency proceedings initiated in a different country. Once commenced, the chapter 15 proceeding allows the debtor to seek the protection of the automatic stay, thus protecting any assets located in the territorial jurisdiction of the U.S.

France Small Flag France

  • Reorganisation proceedings (redressement judiciaire)

When a company is insolvent and its recovery appears possible, its management, any unpaid creditor or the public prosecutor may apply for the opening of a judicial reorganisation.
The court opens a six-month “observation period” (which is renewable up to 12 months and exceptionally up to 18 months upon request of the public prosecutor) during which the debtor will negotiate with its creditors a waiver of debt or rescheduling. During the observation period, a judicial administrator will be in charge of assisting the management of the debtor’s business. The administrator may also be empowered by the court to take over the management and control of the debtor.
At the end of the observation period, the judge will make an order for (a) the continuation of the business through a reorganisation plan which must be adopted by the creditors in the same conditions as for the safeguard; (b) the sale of all or part of the debtor’s assets through a sale plan; or (c) if the latter fails, the progression into a liquidation proceeding.

  • Judicial liquidation proceedings

Liquidation is the appropriate remedy when the company is insolvent and its reorganization or rescue appears obviously impossible. It may be initiated by the debtor, any unpaid creditor or the public prosecutor. The purpose of such a proceeding is to liquidate a company by selling it as a whole or each branch of activities or asset one by one. In order to request the court to open an immediate liquidation proceeding, the debtor must show evidence that its recovery is hopeless and obviously impossible. The court may order the immediate liquidation of the debtor’s assets and will appoint a liquidator to replace the debtor in its management and proceed with the sale of the assets (private sale or auction). However, when it seems possible that all or part of the business has the chance to be sold to a third party, then the operation of the company will continue temporarily for up to four months.

Luxembourg Small Flag Luxembourg

The bankruptcy proceedings (faillite) are the most common proceedings filed against commercial companies in Luxembourg. These proceedings aim at winding-up a company's assets in the best interests of the estate and its creditors.

Once a bankruptcy procedure is opened, the directors/managers are removed from their functions and a bankruptcy receiver is appointed by the court to manage the bankruptcy estate. The receiver is responsible for realising the debtor's assets and distributing the proceeds to the creditors, under the supervision of a supervisory judge (juge-commissaire). Creditors have no control over the procedure and the appointment of the receiver or its actions.

Individual legal actions by privileged and unsecured creditors against the debtor are suspended once the company has been declared bankrupt. Creditors must file a proof of claim with the court, nevertheless, "bankruptcy proof" secured creditors (for example, security receivers/assignees for security purposes under the Financial Collateral Law and mortgagees) can freely take enforcement action regardless of the bankruptcy proceedings.
Bankruptcy proceedings are concluded by a judgment closing the proceedings.
The procedure typically lasts between one and three years but can be significantly longer, depending on the complexity of the case.

New Zealand Small Flag New Zealand

Liquidation

Liquidation is a statutory winding up process which can be initiated by the company’s shareholders, directors or by the Court (on the application by, among others, creditors if the Court is satisfied the company is unable to pay its debts).

Liquidation involves the realisation and distribution of a company’s assets in order to meet the claims of creditors. Liquidators are appointed and operate in accordance with Part 16 of the New Zealand Companies Act 1993. The commencement of liquidation brings about a moratorium on proceedings against the company or (with exceptions for secured creditors) its property.

Once appointed, the liquidator takes over the management of the company, realises its assets, pays its creditors and distributes the balance (if any) to the company’s shareholders. A liquidator has limited powers to carry on the business of the company. A liquidator is able to challenge insolvent transactions, or transactions at undervalue, terminate certain contracts, disclaim onerous property, compromise claims and sell the company’s assets and/or business. A liquidator is an officer of the Court, and is subject to supervision of the Court. There is no prescribed timeframe within which a liquidation must be completed.

Secured creditors generally stand outside the liquidation process and are entitled to separately realise their secured property. To the extent there is a shortfall, the secured creditor can claim in the liquidation as an unsecured creditor for that shortfall. Similarly, if there is a surplus after realisation the secured creditor must account to the liquidator for that surplus.

After realising the company’s assets, the liquidator must apply the proceeds towards their own fees and expenses, followed by paying preferential creditors (generally in the nature of employee payments and taxes) and then general unsecured creditors. Each creditor will share in the proceeds proportionately.

Receivership

In New Zealand, receivership is the most common form of enforcement procedure in respect of insolvent entities who have granted security over their assets. Receivership is initiated by a secured party in relation to some or all of the assets of the entity over which that secured party holds a security interest. The right to appoint receivers, and the scope of a receiver’s powers, are generally a matter of contract under the terms of the relevant security agreement. The appointment and conduct of receivers is also regulated by the New Zealand Receiverships Act 1993 and the common law.

The appointment of a receiver does not create a moratorium in relation to the debtor or its assets, and other creditors can continue to enforce their rights and remedies against the debtor or its assets subject to the prior ranking rights of the secured creditor.

A receiver has the right and power to manage the business and to realise the assets of the debtor in receivership. On appointment of a receiver, the directors of a debtor company remain in office but cease to have the power to manage and control the debtor company's assets. A receiver is the agent of the debtor in receivership (unless provided otherwise in the security agreement) and can contract on the debtor's behalf. The appointing secured creditor should not instruct or direct the receiver, however the secured creditor retains the right to dismiss and appoint an alternative receiver. The debtor in receivership retains ownership and possession of the security property. All pre-receivership contracts remain on foot (subject to any termination provisions set out in the individual contracts as discussed further in question 12 below).

A receiver is under a statutory duty to act: (i) in good faith and for a proper purpose; and (ii) must exercise his/her powers in the best interests of the appointing secured creditor. To the extent consistent with those duties, a receiver must exercise his/her powers with a reasonable regard to the insolvent company, others claiming an interest in the receivership property, unsecured creditors and guarantors of the insolvency company. Receivers are subject to Court supervision, and may seek directions from the Court as to the extent of a receiver's rights, powers and obligations.

The receiver owes residual duties to the debtor, its sureties, unsecured creditors and shareholders to have reasonable regard to the interests of those persons.

Statutory management

A statutory manager may be appointed to a New Zealand company pursuant to the New Zealand Corporations (Investigations and Management) Act 1989. Statutory managers are only very rarely appointed in cases of corporate insolvency.

Statutory managers are appointed where it is considered by the New Zealand Financial Markets Authority that the company is acting fraudulently or recklessly or that it is necessary to protect the interests of shareholders or creditors, or for any other reason in the public interest and such interests cannot be adequately protected in another way.

While a company is under statutory management, there is a moratorium which prevents any
proceedings or enforcement action being taken or continued by any person (including secured creditors) against the corporation without the statutory manager’s consent. There is also a prohibition on the transfer or removal of any assets of the company without the statutory manager’s consent.

A statutory manager has broad powers to manage and carry on the business of the company, challenge insolvent transactions, terminate certain contracts, disclaim onerous property, compromise claims and sell its assets and/or business.

A statutory manager is also entitled to suspend, in whole or in part, the payment of any debts or the discharge of any obligation. There is no limit on the period during which the moratorium or suspension may continue.

Voluntary administration – (as discussed further in Question 8)

As discussed further in Question 8, the New Zealand Companies Act 1993 provides for the appointment of a voluntary administrator to an insolvent company (or a company that may in the future become insolvent).

The New Zealand voluntary administration regime is generally modelled on the equivalent Australian regime and the relevant provisions of the New Zealand Companies Act are substantially the same as the equivalent provisions under Australian law.

Voluntary administration is intended to maximise the chances of a company (or its business) continuing in existence or, if that is not possible, providing a better return for creditors than immediate liquidation.

A company can be placed into voluntary administration by its directors, a liquidator, a secured creditor who has a security interest over substantially the whole of the company’s property or the Court on the application of a creditor or certain others.

On the appointment of an administrator a moratorium on enforcement action commences such that creditors cannot take steps to enforce any debts or security against the company without the consent of the administrator or the leave of the Court. The moratorium does not apply to secured creditors who hold a security interest over all or substantially all of the company’s assets, if those creditors elect to enforce their security interest within the 10 working days after the company goes into administration. Nor does the moratorium apply to secured creditors who have already taken steps to enforce the security interest prior to the administration.

During the administration, the administrator has control over the company’s business and property (except for company property in respect of which a secured creditor has appointed a receiver). The administrator can manage and dispose of any business or property and can perform any function and exercise any power on the company’s behalf that the company could perform if it were not in an administration. Administrators are subject to Court supervision, and can seek directions as to the extent of their rights, powers and obligations.

The moratorium will expire when the creditors vote (at the ‘‘watershed meeting’’) to return the company to its directors, to appoint a liquidator or to execute a deed of company arrangement (DOCA). The watershed meeting must be held within 25 working days after the commencement of the administration (or longer if the Court has approved an extension to the convening period). If a DOCA is approved by a majority in number representing 75% by value of creditors it is binding on all unsecured creditors, as well as on secured creditors who have voted in favor of the DOCA.

Creditors Compromise

As discussed further in Question 8, a creditors’ compromise is a binding arrangement between an insolvent company and its creditors concerning payment of the company’s debts other than in accordance with the strict legal rights of those creditors.

The compromise may involve the suspension or deferral of payments, the acceptance of a
lesser sum as full and final settlement or instalment arrangements, or the conversion of debt into equity.

Compromise arrangements are made under Part 14 of the New Zealand Companies Act 1993. The
directors, a receiver or a liquidator may propose a compromise as of right, and a creditor or a
shareholder may propose a compromise with the leave of the Court. Part 14 requires a distinction to be made between classes of creditors. Although each class of creditors vote on the proposal separately, the resolution must be the same for each class. Each class must approve the proposal by a majority in number and by 75% in value of creditors who voted in that class (there is no ability to cram down dissenting classes). Unless a proposal provides otherwise, the approval of the compromise is conditional upon all classes voting in favor of the proposal.

A compromise once approved by the required majority of creditors, will bind all creditors to whom notice of the compromise proposal was given, including even those that do not agree with it. However, a creditor who voted against the compromise may challenge the compromise by applying to the Court within 10 working days after notice of the result of the voting was given to the creditor. If the Court is satisfied that the compromise is unfairly prejudicial to that creditor or the class of creditors to which that creditor belongs, the Court may make an order that the creditor is not bound by the compromise.

Until the compromise is approved, there is no moratorium on creditors taking enforcement steps against the company.

Schemes of Arrangement

As discussed further in Question 8, creditors claims may also be varied or compromised via a Court-approved scheme of arrangement under Part 15 of the New Zealand Companies Act 1993.

Part 15 allows what is in effect a creditors compromise to be approved by the Court outside of the Part 14 process discussed under ‘‘Creditors’ Compromises’’ section above and below in Question 8.

A Court may, on the application of a company or any of its shareholders or creditors, order that a compromise, arrangement or amalgamation be binding on the company and on such other persons or classes of persons including creditors as the Court may specify. Any order may be made on such terms and conditions as the Court thinks fit.

However, as the Court has a duty to ensure that the rights of affected creditors are adequately protected, the Court is likely to order that the creditors vote on the proposed compromise before it considers whether to approve it.

Romania Small Flag Romania

After the date of opening of the insolvency procedure, a period named the observation period follows, in which the official receiver analyses the legal and patrimony situation of the company for determining whether there are real perspectives to rescue the company based on a reorganization plan or if the company should enter into bankruptcy. The opening of a simplified procedure of bankruptcy may be ordered also directly if a series of conditions expressly provided by the law (lack of assets, absence of the reorganization chances) are met. At the same time, the bankruptcy procedure may be opened also as a result of the failure of a reorganization plan. From the date of opening of the insolvency procedure, the statutory management ceases to have powers and duties, and the company will be administered by a special administrator appointed by the shareholders (in exceptional situations and strictly provided by the law, the debtor’s right of administration may be lifted, in which case the company will be administered by the official receiver). Nevertheless, even in the case in which the administration right is not lifted, the official receiver supervises the debtor’s activity. The courts of law have under the law the power to exercise a legality control on the measures taken in the procedure. To this end, interested persons may address to syndic judges for the analysis of the legality of the challenged measures. At the same time, aspects relating to the opportunity of conclusion of certain deeds are under the opportunity control of the creditors summoned by the official receiver in the creditors’ meeting. In terms of period, the law provides that the observation period may not be longer than one year, and if a reorganization plan is proposed, this may be performed for maximum three years, with the possibility to prolong it for another year with the creditors’ consent. In what regards the bankruptcy, so if a reorganization plan is not proposed or the proposed plan fails, the law does not provide for a maximum term in which the procedure must be completed. Thus, a bankruptcy procedure may take as long as necessary for the liquidation of all the assets and recovery of all receivables.

Switzerland Small Flag Switzerland

There are two main types of formal insolvency and restructuring proceedings in Switzerland: bankruptcy (i.e., liquidation) proceedings (Konkursverfahren) and composition proceedings (Nachlassverfahren).

In bankruptcy proceedings, all business activities of the insolvent debtor are generally discontinued and the management can no longer validly act on behalf of such debtor. All acts necessary in the context of the bankruptcy proceedings are subsequently carried out by the competent bankruptcy authorities and the receiver in bankruptcy. In contrast, an insolvent debtor may generally continue its business in the context of composition proceedings. While the executive bodies continue to be in charge of business operations, the insolvent debtor is typically placed under supervision by an administrator who needs to approve certain transactions and can issue instructions of both general and specific nature. The court can further limit the management rights of the insolvent debtor.

The opening of both proceedings must be ordered by the court. The court's further involvement in bankruptcy proceedings is generally limited whereas its role is more prominent in composition proceedings where a number of actions and procedural steps must be approved or granted by the court. Creditors benefit from various rights in both types of proceedings, including inspection rights, rights to challenge certain acts of the insolvency practitioner and participation rights at court hearings.

The duration of insolvency proceedings largely depends on the complexity of the case. Composition moratoria which are terminated due to a successful restructuring will typically take considerably less time (anywhere between a few months and two years) than bankruptcy proceedings in relation to large companies which involve numerous jurisdictions and entail a variety of complex legal issues (which may easily last up to five years or longer).

Where a debtor is over-indebted, restructuring may also be pursued by way of a corporate moratorium or postponement of bankruptcy (Konkursaufschub) which will also have to be granted by a court. An administrator may be appointed by the court but existing executive bodies generally remain in control of the management of the debtor. The statutory framework for a postponement of bankruptcy is fragmentary. In view of inherent uncertainties, it is not used very often in the German speaking part of Switzerland to restructure corporate debtors. The postponement of bankruptcy is proposed of being abolished within the context of the more general revision of Swiss corporate law referred to under section 3 above.

Israel Small Flag Israel

The Companies Ordinance and the Bankruptcy Ordinance [New Version], 1980 (the "Bankruptcy Ordinance"), include procedures with respect to the commencement of liquidation procedures, appointment of trustees, stay of proceedings, receivership of assets, debt claim filing and approval, creditors meetings, submission and approval of arrangement proposal, foreclosure of collaterals etc.

The Companies Law, refers to the same procedures under an Arrangement proceeding, allowing the continuance of the company's operations, including the ability to raise new debt secured by existing pledged assets or using such assets in other manner, as required for the company's operation; or imposing obligations on certain essential suppliers and third parties to continue providing services, or to abstain from cancelling the contract due to the insolvency even if they are contractually entitled to do so.

In most insolvency cases, a court officer is appointed in order to manage the insolvency proceedings. Where the operation of the company requires a professional team, the court officer may engage such management or continue the engagement of the existing management.

In recent recovery cases, such as the case of Africa Investments (Israel) Ltd. NIS 3 billion debt arrangement, the creditors skipped the appointment of a court officer and receipt of a stay of proceeding order, maintained a close supervision and involvement in the company's affairs, and negotiated independently the terms of the debt arrangement, leading to significant increase of recovery.

Insolvency proceedings can take from a few months in very straightforward debt restructuring case up to several years in more complicated liquidation or assets foreclosure cases.

The new Insolvency Law introduces a new chapter dealing with possible debt arrangement without any court order for the commencement of recovery or re-arrangement proceedings, as already done in practice.

Updated: April 20, 2018